Financial Advice for the Class of 2015
Amid college graduation season, I am often asked to provide financial advice for college students, who are heading out into the “Real World”. I’m hoping that six years after the worst recession since the Great Depression, the class of 2015 will be more financially prudent than some of its predecessors. That said, recent grads, as well as their elders who are trying to get their financial lives back on track, should work hard to complete “The Big 3”. (1) Pay down debt. Your first priority is to pay off the highest interest consumer-related loans (credit card and autos) and then work your way down to the lower interest ones. If you are among the nearly 70 percent of 2015 graduates with student loans, pay the minimal amount while you are whittling down your consumer debt. If the only debt you have is a student loan, then feel free to make extra payments to accelerate your pay-off time – the average student borrower takes about 20 years to repay the loans and the sooner you repay, the quicker that degree will pay you great dividends!
(2) Establish an emergency reserve fund of 6-12 months’ worth of expenses. This is also the account where you may want to accumulate money for a car or house down payment or any near-term financial goal -- meaning funds that you plan to access within the next year.
(3) Maximize retirement contributions. This is a tough one-very few recent graduates will earn enough money to put away the maximum of $18,000 this year, but many could contribute at least up to the company’s match level; or if they don’t have an employer plan, they could try to fund a Roth IRA up to the $5,500 maximum.
Job Insecurity: On the career front, it is clear that the labor market has shifted and workers now work for many companies, especially in the early years after college. Remember that your first job will not be the last one and the rotten job you hate today may be useful in helping you to figure out where you want to go tomorrow. Definitely cultivate a network, but do so carefully—nobody likes a nudge, who only makes contact when seeking a favor. Finally, be willing to take chances or move laterally so that you can position yourself for the next phase of your career.
MARKETS:
- DJIA: 18,232, down 0.2% on week, up 2.3% YTD
- S&P 500: 2126, up 0.2% on week, up 3.3% YTD
- NASDAQ: 5,089 up 0.8% on week, up 7.5% YTD
- Russell 2000: 1244, up 0.6% on week, up 3.9% YTD
- 10-Year Treasury yield: 2.21% (from 2.14% a week ago)
- July Crude: $59.72, down 1.4% on week
- June Gold: $1204, down 1.7% on week
- AAA Nat'l avg. for gallon of reg. gas: $2.74 (from $2.70 wk ago, $3.66 a year ago)
THE WEEK AHEAD:.
Mon 5/25: Markets closed for Memorial Day
Tues 5/26:
8:30 Durable Goods Orders
9:00 Case Shiller Home Price Index
10:00 New Home Sales
10:00 Consumer Confidence
Weds 5/27:
G-7 finance ministers and central bankers meet (through Fri) - Greece will be the focus
Thurs 5/28:
10:00 Pending Home Sales
Fri 5/29: 529 College Savings Plan Day
8:30 Q1 GDP (2nd estimate could show a contraction from prelim reading of +0.2%
9:45 Chicago PMI
10:00 Consumer Sentiment